Essex County Industrial Development Agency

Revolving Business Loan Program

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Policy and Operating Guidelines

Essex County Industrial Development Agency

P.O. Box 217

Elizabethtown, NY 12932

(518) 873-9114

Fax: (518) 873-2011

The Essex County IDA is an equal opportunity lender, provider, and employer. To file a complaint of discrimination, write: USDA, Director, Office of Civil Rights, Washington, D.C. 20250-9410, or call (202) 720-5964 (voice or TDD)

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ARTICLE 1. GENERAL POLICY & OBJECTIVES

§1-1 Policy and Operating Guidelines 1

§1-2 Objectives 1

§1-3 Form of Assistance 1

ARTICLE 2. ELIGIBILITY REQUIREMENTS

§2-1 Eligible Activities 1

§2-2 Ineligible Activities 2

§2-3 Eligible Borrowers 2

§2-4 Eligible Uses of Program Funds 2

ARTICLE 3. PROGRAM STANDARDS

§3-1 Employment/Cost Ratio 2

§3-2 Program Financing Amount 3

§3-3 Minimum Amount of Program Assistance 3

§3-4 Maximum Amount of Program Assistance 3

ARTICLE 4. LENDING POLICIES

§4-1 Terms of Loans 3

§4-2 Interest Rate 4

§4-3 Repayment Terms 4

§4-4 Security 4

§4-5 Subordination 5

ARTICLE 5. APPLICATION PROCESSING

§5-1 Loan Applications 5

§5-2 Application Fee 5

§5-3 Application Processing 5

§5-4 Loan Review Committee 6

§5-5 IDA Board Loan Approval 6

§5-6 Loan Disapproval 6

ARTIBLE 6. POST-APPROVAL PROCESS

§6-1 Commitment Letter 7

§6-2 Commitment Fee 7

§6-3 Loan Closings 7

§6-4 Security 8

§6-5 Loan Disbursements 8

ARTICLE 7. LOAN MANAGEMENT

§7-1 Delinquencies 9

§7-2 Annual Financial Review 9

§7-3 Adjustment of Terms and Conditions 9

§ Periodic Interest Rate Review 10

ARTICLE 8. EXCEPTIONS

§8-1 Exceptions – Eligibility/Program Standards 10

§8-2 Exceptions – Other 10

ARTICLE 1

GENERAL POLICY & OBJECTIVES

§1-1. Policy and Operating Guidelines. The purpose of this Policy and Operating Guidelines (the “Guidelines”) is to serve as the primary administrative document for the U.S. Department of Housing & Urban Development (HUD), Community Development Block Grant (CDBG) funded Revolving Business Loan Program (the “Program”) administered by the Essex County Industrial Development Agency (the “IDA”) through its Board of Directors (the “IDA Board”). Unless otherwise provided by the IDA, these Guidelines shall not apply to any other program administered by the IDA unless such other program involves the use or expenditure of funds furnished by HUD to the IDA.

§1-2. Objectives. The primary objectives of the Program are to facilitate the expansion and retention of business activity within Essex County (the “County”), create employment opportunities, and expand the County’s industrial and commercial tax base.

§1-3. Form of Assistance. The Program will provide assistance in the form of secured loans.

ARTICLE 2

ELIGIBILITY REQUIREMENTS

§2-1. Eligible Activities.

In order to be eligible for Program assistance, an applicant must meet the following requirements:

(a) The principal business activity which will be primarily impacted by the

Program financing must be located within Essex County.

(b) The business activity to be undertaken with assistance from the Program

must primarily involve one of the following:

(1) A manufacturing endeavor – defined as manufacturing, fabrication, assembly, processing, growing, packaging, or other enterprise which directly involves the production of an end product;

(2) A Retail endeavor – defined as an activity meets a retail need for County residents and/or tourists;

(3) Other endeavor – transportation, utilities, communications, construction trades, wholesale distribution, agriculture, forestry, accommodations, recreation, food and beverage, art/craft and professional services; or

(4) A service, not listed as specifically ineligible pursuant to §2-2 herein, which is provided to persons, commercial enterprises, or other entities, the majority of which reside or are located outside of Essex County.

must directly result in the creation or retention of employment positions consistent with the Federal regulations 24 CFR part 570.208 governing the Community Development Block Grant (CDBG) program.

§2-2. Ineligible Activities. The Program will not provide financing for any business activity which does not meet Program eligibility requirements consistent with 24 CFR part 570.207.

§2-3. Eligible Borrowers. Eligible borrowers include sole proprietorships, limited liability partnerships, limited liability corporations and any other entity authorized to conduct business in the State of New York. Loans may also be provided to individuals acting as principals of an eligible entity and who will rent or lease assets to an otherwise eligible borrower.

§2-4. Eligible Uses of Program Funds. Program funds may be used for any justifiable business purpose including, but not limited to fixed assets, current assets including inventory and receivables, permanent working capital, and refinancing of existing debt where such refinancing is a required element of the project financing. The use of Program funds must also be eligible pursuant to the Federal regulations governing the CDBG program.

ARTICLE 3

PROGRAM STANDARDS

§3-1. Employment/Cost Ratio. The maximum amount of Program financing may not exceed the ratio of $35,000 for each employment opportunity to be created or retained. For the purposes of calculating employment opportunities, the following will apply:

(a) Only permanent jobs will be counted; temporary and construction jobs

will not be counted.

(b) Jobs of 35 or more hours per week will be considered as one full-time job.

Part-time permanent jobs of less than 35 hours per week will be converted to full-time equivalent jobs by dividing the number of part-time hours by 40.

the working period is long enough to classify the job as the employee’s principal occupation.

(d) Projected employment must be reasonably expected to occur as a direct

result of the expanded business activity, and such projection may in no instance extend beyond 36 months from the completion of the expansion.

(e) The limit of $35,000 of Program financing per employment position may

be exceeded in instances where the IDA determines that the expanded business activity will effect an extraordinary degree of other public benefit.

§3-2. Program Financing Amount. Consistent with the Federal regulations governing the CDBG program, Program assistance must be no greater than the minimum amount necessary to effect the business activity. Applicants must therefore demonstrate that all other private and public sources of debt and equity have either been maximized or are inappropriate, unaffordable, or otherwise unavailable.

§3-3. Minimum Amount of Program Assistance. Program assistance will not be considered where the amount of such required assistance is less than $10,000.

§3-4. Maximum Amount of Program Assistance. The program does not establish a policy regarding the maximum amount of Program assistance available. However, the IDA will, from time to time at its discretion, establish maximum amounts of assistance based on the total amount of Program funds available and the demand for such funds.

ARTICLE 4

LENDING POLICIES

§4-1. Term of Loans. The term of any loan under the Program will be determined by the IDA, in its discretion, based upon such factors as the structure of other related loans, the nature of the collateralized assets, and the borrower’s projected ability to repay the loan, as well as the following:

(a) The term of a fixed asset loan will generally be consistent with the useful

life of the assets being financed, such useful life periods being consistent with standard commercial lending policies but in no instance exceeding fifteen (15) years.

(b) The term of a working capital loan may not exceed five (5) years.

§4-2. Interest Rate. The interest rate charged for the use of Program funds will be determined by the IDA, in its discretion, based upon such factors as the risk of default, the value of security, and the prevailing commercial lending rates. The minimum fixed interest rate is 2.0%. There is no stated policy regarding variable interest rates.

§4-3. Repayment Terms. The IDA, in its discretion, will determine the schedule of loan repayments on a case-by-case basis taking into consideration as the IDA deems appropriate factors such as the applicant’s projected ability to repay the loan, the projected value of the collateral and other security, and the overall risk assumed by the Program. Repayment terms may involve standard forms of loan amortization schedules with balloon payments of principal, and/or such other terms as may be determined by the IDA to be appropriate.

§4-4. Security. The IDA will determine the required security for each loan on a case-by-case basis taking into consideration as the IDA deems appropriate factors such as the risk of default, the nature and value of the security, and the position of the Program in relation to other lenders. In determining the appropriate security, the following will apply:

(a) The IDA will generally require a security interest in all assets financed

with Program funds. Other assets of the borrower may be required as additional security at the IDA’s option.

(b) For loans to corporations, partnerships or limited liability companies, the

IDA will require the personal guarantee of all owners of at least 20% of the voting stock or partnership interest of the company. The personal guarantee of other shareholders, officers, principals, or partners may also be required at the discretion of the IDA.

security selected personal assets of one or more of the owners, and/or security interests in assets of other business entities of one or more of such owners.

(d) For loans to individuals, partnerships, or corporations, which have

affiliated interests and/or identities of ownership with other business entities, the IDA may require additional guarantees, and/or security interests in assets of other business entities of one or more of such owners.

(e) For loans to businesses which have a dependence upon specific

individuals for their continuing viability, the IDA may require an assignment of insurance on the lives those persons.

(f) In addition to any other security interest the IDA may require letters of

credit to be held by the IDA as security for Program loans.

§4-5. Subordination

(a) The IDA may allow a subordination of Program debt and collateral to

private institutional lenders where necessary to facilitate the maximum financial participation by the private lenders.

(b) The standing of the IDA’s financing relative to other public or quasi-

public lenders will be negotiated on a case-by-case basis.

notes payable to any officer, owner, or similarly affiliated party to the borrower where such subordination is appropriate and feasible.

(d) The IDA will generally require the execution of intercreditor agreements in instances where multiple lenders exist. The use and form of such agreements shall be the subject to the approval of the IDA’s attorney or counsel.

ARTICLE 5

APPLICATION PROCESSING

§5-1. Loan Applications. Applications for Program financing must include all of the information required by the Program Application Form, and any additional information as may be reasonably requested by the IDA. The Program application shall be in a form substantially similar to Appendix A hereto.

§5-2. Application Fee. No fee will be charged for the submission of an IDA loan application.

§5-3. Application Processing. The processing of loan applications will generally consist of the following:

(a) Review applications for completeness and procure appropriate additional

information.

(b) Review for Program eligibility criteria and eligibility pursuant to Federal

CDBG regulations.

(d) Determine amount and terms of Program financing, including appropriate

security.

(e) Perform appropriateness review in conformance with HUD guidelines.

(f) Prepare written report to the Program Loan Review Committee summarizing the review process and providing recommendations as appropriate.

§5-4. Loan Review Committee. The IDA Board shall constitute the Loan Review Committee to review all loan applications, and to determine loan management issues as provided in Article 7; except that the IDA Board may be resolution establish a committee comprised of three (3) of its members to serve and act as the Loan applications and make recommendations to the IDA Board regarding such applications and/or loan management issues as provided in Article 7.

§5-5. IDA Board Loan Approval. The IDA Board shall have sole authority to approve Program loans. Such authority shall include the commitment to lend Program funds, the interest rate(s) to be charged, the repayment terms, and the requisite security for the loan. The application of other appropriate conditions of lending and covenants of the borrower shall be determined by the IDA Board, subject to input from the IDA’s attorney and/or the Loan Review Committee.

§5-6. Loan Disapproval.

(a) Loan applications may be disapproved by the Loan Review Committee

and/or the IDA Board based on a lack of application completeness or a failure to meet the eligibility criteria pursuant to §5-3 (a) and (b) of these Guidelines, respectively. In such instances, the applicant will be notified in writing of the reason(s) for disapproval.

(b) Loan applications may be disapproved by the IDA Board if the Board

determines that Program financing is clearly inappropriate based on the reviews conducted in accordance with §5-3 (c) and (e) of these Guidelines. In such instances, the applicant will be notified in writing of the reason(s) for disapproval.

reasons which represent a reasonable determination that the approval of the Program application would not meet the objectives of the Program and/or would not represent an appropriate or prudent use of Program funds. In such instances, the applicant will be notified in writing of the reason(s) for disapproval.

ARTICLE 6

POST-APPROVAL PROCESS

§6-1. Commitment Letter. A commitment letter, similar to the sample contained in the Appendix B hereto, shall be sent to the applicant upon the approval of a Program loan which will include, at a minimum, the following information:

(a) The amount of the loan approved, the applicable interest rate, the term of

the loan, the terms of repayment, and the expiration date of the commitment.

(b) The required use of the loan funds.

guarantees, pledges of assets, assignment of life insurance, etc.

(d) Summary information regarding employment requirements.

(e) Any other conditions of lending.

Essex County Industrial Development Agency